Through property redevelopment, companies aim to capitalize on opportunities to add incremental square footage, or increase the productivity of previously-occupied space through aesthetic upgrades, re-tenanting, or changing the retail use of space. Many times, redevelopments result from acquiring possession of anchor space and subdividing it into multiple spaces.
Major retail REITs (real estate investment trusts) such as Simon Property Group (SPG), General Growth Properties (GGP), and Macerich (MAC) are active in property development and redevelopment projects. CBL & Associates Properties (CBL) comprises 0.4% of the SPDR Dow Jones REIT ETF (RWR).
CBL focuses on development opportunities in middle-market trade areas that are underserved by existing retail operations. These middle-markets must have sufficient demographics to effectively maintain a competitive position.
Rise in projects
CBL (CBL) has undertaken a number of development and redevelopment projects since 2012 as a part of its portfolio strategy. Capital expenditure on development, redevelopment, expansion, and renovation fell to its lowest level in 2011, to $61 million. However, with the onset of market recovery, the company’s capital expenditure rose to reach its five-year peak of $177.5 million in 2014, compared with $143.8 million in the previous year.
In 2014, CBL continued to make substantial progress on its major development and redevelopment projects. As of fiscal 2014, the company had development and redevelopment interests in five malls and four community centers. Additionally, CBL had 1.3 million square feet of new developments, redevelopments, and expansions, representing a total investment of over $240 million under construction in 2015.
In the next article, we’ll discuss CBL’s strategy to increase shareholder returns.